ERM Glossary: Repurchase agreement (repo)

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A repurchase agreement or ‘repo’ is a (usually) short-term funding agreement which allows a borrower to sell a financial asset, such as ABS or Government bonds as collateral for cash. As part of the agreement the borrower agrees to repurchase the security at some later date, usually less than 30 days, repaying the proceeds of the loan.

A reverse repurchase agreement or ‘reverse repo’ is the same but looked at the opposite way round, i.e. with the positions of the two parties involved in the transaction reversed.

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